There is a powerful pattern of optimism and momentum in Facebook Inc (NASDAQ:FB) stock right before of earnings, and we can capture that pattern by looking at returns in the option market. The strategy won't work forever, but for now it is a momentum play that has not only returned 1,519% annualized returns, but has also shown a high win-rate of 67%.

The premise is simple -- one of the least recognized but most important phenomena surrounding this bull market is the amount of optimism, or upward momentum, that sets in the two-weeks before an earnings announcement. Now we can see it in Facebook Inc.

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The Options Optimism Trade Before Earnings in Facebook Inc
Let's look at the results of buying a monthly call option in Facebook Inc two-weeks before earnings (using calendar days) and selling the call before the earnings announcement.

Here's the set-up in great clarity; again, note that the trade closes before earnings, so this trade does not make a bet on the earnings result.

Here are the results over the last three-years in Facebook Inc:

FB: Long Call

% Wins: 67%
Wins: 8 Losses: 4
% Return:  699% 
% Annualized:  1,519% 

Tap Here to See the Back-test

The mechanics of the TradeMachine™ are that it uses end of day prices for every back-test entry and exit (every trigger).

We see a 699% return, testing this over the last 12 earnings dates in Facebook Inc. That's a total of just 168 days (14 days for each earnings date, over 12 earnings dates). That's an annualized rate of 1,519%. That's the power of following the trend of optimism into earnings -- and never even worrying about the actual earnings result.

We can also see that this strategy hasn't been a winner all the time, rather it has won 8 times and lost 4 times, for a 67% win-rate and again, that 699% return in less than six-full months of trading.

Setting Expectations
While this strategy had an overall return of 699%, the trade details keep us in bounds with expectations:
      The average percent return per trade was 53.87%.

Checking More Time Periods in Facebook Inc
Now we can look at just the last year as well:

FB: Long Call

% Wins: 67%
Wins: 4 Losses: 0
% Return:  363.2% 
% Annualized:  2,367% 

Tap Here to See the Back-test

We're now looking at 363.2% returns, on 4 winning trades and 0 losing trades. It's worth noting again that we are only talking about two-weeks of trading for each earnings release, so this is 363.2% in just 8-weeks of total trading which annualizes to 2,367%.
      The average percent return over the last year per trade was 100.1%.

The personality of this bull market is one that shows optimism before earnings -- irrespective of the actual earnings result. That has been a tradable phenomenon in Facebook Inc.